v3.25.2
Note 9 - Derivatives and Hedging Activities
6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE 9. DERIVATIVES AND HEDGING ACTIVITIES 

 

The Company enters into commitments to originate and sell mortgage loans. The Bank uses derivatives to hedge the risk of changes in fair values of interest rate lock commitments and mortgage loans held-for-sale. An optimal amount of mortgage loans are sold directly into bulk commitments with investors at the time an interest rate is locked, other loans are sold on an individual best-efforts basis at the time an interest rate is locked, and the remaining balance of locked loans are hedged using To-Be-Announced (“TBA”) mortgage-backed securities or bulk mandatory forward loan sale commitments.

 

Derivatives are accounted for as free-standing or economic derivatives and are measured at fair value. Derivatives are recorded as either other assets or other liabilities on the condensed consolidated statements of condition.

 

Derivatives are summarized as follows:

 

  

June 30, 2025

  

December 31, 2024

 
  

Notional

  

Fair Value

  

Notional

  

Fair Value

 
  

Amount

  

Asset

  

Liability

  

Amount

  

Asset

  

Liability

 
  

(In Thousands)

 

Interest rate lock commitments

 $18,335  $17  $-  $10,155  $-  $103 

Forward TBA mortgage-backed securities

  12,000   -   140   10,000   142   - 

 

Changes in the fair value of the derivatives are recorded in mortgage banking, net, within noninterest income on the condensed consolidated statements of income. Net losses of $70,000 were recorded for the three months ended June 30, 2025, compared to net losses of $45,000 for the three months ended June 30, 2024. Net losses of $162,000 were recorded for the six months ended June 30, 2025, compared to net losses of $67,000 for the six months ended June 30, 2024.